How do phone contracts work?

Pay monthly contracts help you get the latest phone but how do phone contracts work and are they always the best choice? Here’s the info you need.

man looking at phone bill

If you want to get your hands on the latest iPhone or Samsung smartphone, you might want to consider taking out a phone contract. For many people, this is one way to get your choice of the newest handsets. Others might prefer to buy the handset outright, even if that means having an older model or a refurbished phone.

With a phone contract, you pay a monthly fee over 12-36 months for the handset and an allowance of calls, data and texts. Depending on what contract you sign up for, you may or may not have to pay a one-off upfront cost for the handset too. This tends to come off your first bill. You may need to pass a credit check before you sign up for a phone contract, particularly for more expensive handsets.

What is a contract phone?

A contract phone is a handset that you get when you take out a new phone contract—usually for 18, 24, or 36 months. Contract phones tend not to be as readily available on 12-month agreements these days. A phone contract may work well if you want or need a new phone but can’t afford to pay for it outright.

Networks often offer deals when you take out a new phone contract, such as half-price airtime for the first six months. In this instance, the discount applies to the airtime portion of your contract, not the handset.

Compare contract deals online

What are the pros and cons of contract phones vs SIM deals?

With a phone contract, you can get a new mobile, but with a SIM only deal, you’re making monthly payments for your SIM card only, there’s no new phone involved. SIM only deals range from rolling 1-month contracts to fixed 24-month contracts. With contracts as short as 30 days, you can swap quickly and easily, giving you more flexibility.

There are a number of differences between getting a phone contract and getting a SIM only deal:

Contract phone SIM only deal
You get a new phone.
A contract may be good for your credit score.
Spread out the cost of the handset.
Benefit from reward schemes and discounts.
You have to sign up to a long-term contract.
Credit check requirements.
Option to choose a short-term agreement.
More sustainable if you use an old or refurbished phone.
Prices go up annually (depending on the provider).
Usually cheaper.
Must have an existing handset.
Table showing the pros and cons of contract phones v SIM only deals

Can I get a contract phone with a poor credit rating?

Before you sign up for a phone contract, you might need to pass a credit check. This helps mobile phone providers establish whether or not you can make the monthly payments. If you have a poor credit rating, mobile phone providers may see you as a risk. In this case, you might not be able to sign up for a contract.

But this doesn’t mean you can’t get a new phone. You could get a less expensive handset as providers see these as lower risk. Alternatively, you could build up your credit score by taking out a SIM only deal.

How do I find the best contract phone deals?

Before you start the search for a contract phone, there are some questions to think about:

  • What’s your budget? Think about how much you can afford to pay each month.
  • What kind of package do you need? If you tend to make a lot of calls, a contract that includes a lot of minutes might be best. Likewise, if you need a lot of data, an unlimited data package might suit your needs.
  • How long can you commit for? If you have some upcoming life changes, you might want a shorter contract.
  • Do you need the latest phone? Be prepared to pay more if you want the brand new iPhone, for example.
  • Who offers the best customer service? If any issues arise during your long-term contract, you want to be sure that they’ll be dealt with properly. So double-check customer service scores and reviews to find the most reliable, helpful provider.

Once you know what phone you want and roughly the kind of package you need, you can search online or in-store for the best contract deals. You can start by . A good time to switch is when your current phone contract is coming to an end. If you’re already on a phone contract, you might want to upgrade with your current provider.

If you’ve been with them for a while, they may be able to sort out a good price for you. Either way, take time to find the best contract deal that suits you and your current (and future) financial situation.

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